Mobile Ad Spending to Gain Momentum

Higher growth rates in 2010–2011

Despite the rising number of mobile users and their increasingly sophisticated habits and mobile devices, advertising and marketing dollars flowing to mobile lag behind consumer usage of the channel. But long-term growth trends are positive. Spending on mobile advertising is set to increase rapidly over the next five years.

eMarketer estimates that mobile ad spending, including messaging-based formats, will reach $416 million in 2009, increasing to $1.56 billion by 2013.

“As an emerging advertising channel, mobile will continue to see lofty growth rates through 2013,” said Noah Elkin, eMarketer senior analyst and author of the new report, “Mobile Advertising and Marketing: Change Is in the Air.” “Mobile will grow considerably more quickly than online ad spending as a whole, more in line with emerging online formats such as digital video.”

Like many research firms have done in the past year, eMarketer has revised downward its projections for mobile advertising in the US to account for the realities of the global economic downturn. But based on extensive interviews with marketers and agency executives, the overall long-term outlook for mobile remains optimistic.

Estimates for mobile ad spending span a broad range. At the low end, Yankee Group predicts $184 million in 2009 spending, while the Mobile Marketing Association forecasts spending will reach $1.7 billion this year. This disparity reflects the relative immaturity of the channel, particularly for non-messaging-based advertising and marketing formats.

In terms of spending share for various mobile formats, eMarketer foresees a rise for search, from 18% ($57.6 million) of the total in 2008 to 37% ($577.2 million) in 2013. Over the same time period, eMarketer also projects a decline in share for SMS, from 60% of the total ($192 million) to 28% ($436.8 million), while display will grow from 22% ($70.4 million) to 35% ($54.6 million).Of all mobile ad formats, eMarketer believes search will see the steepest growth through 2013, yielding a CAGR of 58.6% between 2008 and 2013.

“Disparate hardware and software platforms, competing app stores, rival search engines and a large, fragmented universe of agencies and service providers make the mobile ecosystem more daunting than the desktop environment,” said Mr. Elkin. “But overcoming this complexity pays dividends.”

Mobile has an additive effect on other advertising and marketing efforts, and can bridge the gap between digital and traditional campaigns. It is also flexible, lending itself to both direct response and brand reinforcement and awareness campaigns.